2007 (10) TMI 524 - AT - Central Excise

Tribunal upholds duty demand on seized fabrics, but allows appeal on grey returns and finished stock shortages.

The Tribunal upheld the duty demand on fabrics seized from the intercepted tempo due to discrepancies in documents. However, it set aside demands related ... Clandestine removal - Proof - Goods seized in intercepted tempo - Demand - Clandestine removal - Demand - Shortage of finished stock Issues Involved:1. Goods seized from the intercepted tempo.2. Finished stock cleared as grey returns.3. Shortages in finished stock.Detailed Analysis:1. Goods Seized from the Intercepted Tempo:The appellant contended that the goods seized from the intercepted tempo were duty-paid, supported by gate passes and challans. The appellant argued that the duty had been paid, as evidenced by the gate passes and the Personal Ledger Account (PLA). However, the Tribunal found discrepancies in the documents, noting that the gate passes did not cross-reference the delivery challans and lacked the consignee's address. The Tribunal concluded that the documents did not instill confidence and upheld the demand on this count, rejecting the appellant's reliance on the case of Kothari Products Ltd. v. CCE, Kanpur.2. Finished Stock Cleared as Grey Returns:The appellant claimed that the grey fabrics returned were not considered by the revenue, leading to a demand for duty on such returns as processed fabrics. The appellant provided a lot register and summary to show that the grey fabrics were returned to the merchants as unusable. The Tribunal noted that the lot register indicated the return of grey fabrics and that the dispatch was in line with the trade notice dated 22-10-93. The Tribunal found that the appellant followed the prescribed procedure and that the existence of challans indicated the return of grey fabrics. The Tribunal set aside the confirmation of demand on this count, accepting the appellant's evidence.3. Shortages in Finished Stock:The appellant argued that the shortages in finished stock were due to misreading of documents and wrong quantification. The Tribunal examined the RG-1 register and found discrepancies in the closing balance. The Tribunal considered the possibility of shrinkage and noted that a difference of 40,091 L.Mtrs could be due to shrinkage, which was demonstrated to be 0.3% of the total grey fabrics processed. The Tribunal referenced a previous decision in the appellant's own case, which held that shortages due to shrinkage do not amount to clandestine removal. Consequently, the Tribunal set aside the demand of duty on this count.Conclusion:The Tribunal upheld the demand of duty on the fabrics found in the intercepted tempo but set aside the demands related to shortages in finished goods and the alleged removal of processed fabrics as grey fabrics. The appeal was allowed in part, as indicated in the detailed analysis.